23 Dec 2014
New Bridge and Pearl River Delta West (1): Three-hour Economic Circle
After the opening of the Hong Kong-Zhuhai-Macau Bridge (HZMB), Hong Kong will not only have direct land transport link with Zhuhai, but will find its land distance with Zhongshan and Jiangmen in the vicinity of Zhuhai greatly shortened. The HZMB will contribute to Hong Kong's economic and people-to-people links with western PRD. In order to assist Hong Kong companies in making early plans for development, HKTDC Research conducted preliminary studies in Zhuhai, Zhongshan and Jiangmen as well as Yangjiang which lies further west but is still within the HZMB's three-hour economic circle to explore business opportunities worthy of attention in western PRD thanks to easier accessibility.
The HZMB's three-hour economic circle
The Hong Kong-Zhuhai-Macau Bridge (HZMB) is the first mega-size sea crossing linking Hong Kong, Zhuhai and Macau. It starts from an artificial island off the Hong Kong International Airport and runs westwards to the Zhuhai-Macau boundary crossing facilities on another artificial island. The total length from the Zhuhai-Macau boundary crossing facilities to the Hong Kong boundary crossing facilities is 41.6 km and travelling time is about 45 minutes.
The HZMB will greatly shorten the distance between Hong Kong and the western Pearl River Delta (western PRD). After reaching Zhuhai by bridge, one can proceed to western Guangdong cities like Jiangmen and Yangjiang via the coastal expressway. Rough estimates show that it takes about an hour and an hour and half to go from Zhuhai to Zhongshan and Jiangmen respectively at present. After the opening of the bridge, Hong Kong will not only have direct land transport link with Zhuhai, but will find its land distance with Zhongshan and Jiangmen in the vicinity of Zhuhai greatly shortened. Even Yangjiang located further west will be within the HZMB's three-hour economic circle. The improvement of Hong Kong's land transport link with western PRD will give greater flexibility to the movement of people and goods, easing some of the constraints such as ferry schedule and loading limit.
The HZMB will contribute to Hong Kong's economic and people-to-people links with western PRD and strengthen their mutual complementarity in terms of factors of production such as capital and human resources, even market and trade. For example, Hong Kong-based professional services providers may, through the better connectivity afforded by the bridge, be able to provide services more efficiently to western PRD. The bridge will also generate new opportunities for logistic services between Hong Kong and the west bank of the Pearl River. Other sectors, such as industrial relocation and tourism, may also benefit from the opening of the bridge.
In order to assist Hong Kong companies in making early plans for development, HKTDC Research conducted preliminary studies in Zhuhai, Zhongshan and Jiangmen which have more direct links with the bridge as well as Yangjiang which lies further west but is still within the HZMB's three-hour economic circle to explore business opportunities worthy of attention in western PRD thanks to easier accessibility.
Progress of bridge construction
According to reports released in mid-October 2014, more than 50% of the main part of the project has been completed and good progress is made in the building of the bridge itself. The HZMB Authority is still confident of completing the project before the end of 2016 even though the date of its opening to traffic will depend on the progress of the construction of the boundary crossing facilities and the link roads. There are reports of a possible delay in the completion of the artificial island for the Hong Kong boundary crossing facilities, but even so Hong Kong businesses should make early preparations for the impact and opportunities that will come with the opening of the bridge.
According to information published by the HZMB Authority and the relevant departments in Hong Kong, rough estimates made in 2009 suggested that the initial daily traffic volume for the bridge will be about 9,200-14,000 vehicles, increasing to a designed traffic flow of 35,700-49,200 vehicles by 2035. Daily passenger flow will increase from about 56,000 people in the initial stage to a designed capacity of 230,000 people by 2035. Compared with 2013 when the number of passengers entering or leaving the territory through Hong Kong's ferry terminals averaged about 25,000 people a day, this suggests that passenger flow between Hong Kong and western PRD will have a big potential growth. As for toll rate, initial estimates made in 2009 showed that it would be about Rmb100-200 for sedan cars and Rmb200-300 for trucks. However, the competent authorities of the three parties concerned are conducting studies on more detailed and up-to-date estimates for tolls and traffic and passenger flow, and toll charges may affect estimates for the traffic and passenger flow of the bridge.
Economic development in western PRD
Since China's reform and opening up, the PRD has established links with global supply chains through Hong Kong and become an international manufacturing centre. However, Hong Kong's investment and export-oriented production activities mainly focused on eastern PRD in the past, which not only fuelled the rapid growth of Shenzhen and Dongguan but also widened the economic development gap between the eastern and western PRD regions.
The Guangdong provincial government has actively put forward policy proposals to bridge the regional economic development gaps in recent years. These include the "double transfer" measure (specifically this refers to the relocation of labour-intensive industries from the PRD to the eastern, western and northern parts of the province, and the shift of manpower in these less developed regions (from primary) to secondary and tertiary industries) and the establishment of industrial relocation parks in these regions so that industries struggling with land and other constraints in the developed areas can expand there. One of the targets of the Outline of the Plan for the Reform and Development of the PRD (2008-2020) announced by Guangdong in 2008 was to raise the level of development in western PRD, increase its capacity for industrial and population agglomeration, and enhance its factor agglomeration and producer services.
Seen from the proportions of each of these cities in Guangdong's gross domestic product (GDP), Guangzhou and Shenzhen together account for nearly half of this total. The proportions of cities in western RPD, such as Zhongshan, Jiangmen and Yangjiang, in the region's GDP are relative low. However, what merits attention is that cities like Zhongshan, Jiangmen and Yangjiang have registered faster rates of economic and industrial value-added growth than the provincial average in recent years.
Although the GDP of western PRD is relatively small, cities in the region are actively making use of their competencies to develop their economy. What merits attention is the importance attached by these cities to the balance between economic development and environmental protection and to industrial upgrades. For this reason, they would sometimes put forward specific requirements, especially environmental compliance requirements, when promoting investment. Some industrial parks are also beginning to attach importance to the coordination and development of specialised producer services, such as logistics and designing, thus generating opportunities for the development of these industries.
Bridge brings new opportunities to different sectors
As the 12th Five-Year Plan for the Development of Zhuhai-Hong Kong-Macau Cooperation pointed out, the promotion of economic integration and coordinated regional development is an irreversible trend. The PRD, Hong Kong and Macau must strengthen regional cooperation, optimise the allocation of resources, and promote regional division of labour in order to increase their overall competitiveness. The HZMB will not only shorten the distance between Hong Kong and western PRD but will also make transportation between the two places more flexible and convenient, thus further boosting economic interaction and increasing the flow of personnel, capital, goods and other factors of production in the region.
In terms of manufacturing activities, the HZMB will facilitate the entry and exit of investors and managerial personnel as well as the flow of goods and raw materials and lead to the establishment of new production networks. For Hong Kong companies needing to expand or shift their production bases, this means a greater choice of destinations. The geographical links that come with the completion of the HZMB will also have a direct impact on the logistics industry besides increasing the choices for entry-exit routes in western PRD and improving efficiency, thus giving western PRD greater significance in regional cooperation and resource allocation as a transit and regional distribution centre for imported goods.
The expansion and upgrade of manufacturing industries in Western PRD will also increase the demand for professional services. The HZMB will make it possible for Hong Kong service providers (especially Hong Kong-based small and medium-sized enterprises) to reach production enterprises in western PRD with more flexible means of transport. The opening of the bridge may also generate more opportunities for other industries and sectors, such as tourism, retailing and real estate.
Zhuhai, Zhongshan and Jiangmen which have more direct links with the HZMB and Yangjiang which is further away in western Guangdong but still within the three-hour economic circle each has its own positioning and leading edge. The opportunities that the bridge will bring to Hong Kong businesses in different cities may vary. This series of articles will study the potential opportunities in Zhuhai, Zhongshan, Jiangmen and Yangjiang under the bridge economy.